Canadian cannabis company The Green Organic Dutchman Holdings (TGOD) entered into an agreement to sell its greenhouse in Salaberry-de-Valleyfield, Quebec, for substantially less than the project’s total cost.
The Mississauga, Ontario-headquartered company has agreed to sell the greenhouse for 27 million Canadian dollars ($22.2 million) to another cannabis producer, Cannara Biotech, the companies jointly announced.
TGOD had spent CA$239 million on the property as of last summer, according to a regulatory filing, meaning the company will have lost more than CA$200 million on the facility when the deal is completed later this month.
The company says it plans to use the proceeds of the sale to eliminate its senior term debt.
The pending sale is the latest example of the broad selloff of mass-scale cannabis greenhouses by the largest Canadian producers, which wildly overspent on cultivation space from 2017 to 2019.
One cannabis executive previously characterized the rush to establish those large facilities as an “arms race.”
Earlier this year, Smiths Falls, Ontario-based Canopy Growth sold off two facilities in British Columbia for a combined CA$40.6 million, significantly less than what the company spent on the properties.
The TGOD greenhouse sale includes the majority of the assets on the property, including:
- All industrial and agricultural land.
- The main hybrid greenhouse.
- The rooftop greenhouse.
- All support buildings and certain related equipment.
The processing and manufacturing equipment being used to produce cannabis-derivative products is not subject to the agreement, the company said.
In addition, the buyer agreed to lease back approximately 80,000 square feet of cultivation and processing space in the Quebec facility back to TGOD.
In a previous interview with MJBizDaily, TGOD CEO Sean Bovingdon said most of the CA$200 million loss had already been accounted for in impairments.
“You’re not going to get what you paid to build the thing. No one is, and that’s why we had the write-downs,” he said at the time, referring to the Quebec greenhouse and other greenhouses across Canada of a similar scale and cost.
TGOD also expects the greenhouse sale to lead to annualized savings of CA$4 million in interest and overhead costs.
In addition, the company says its CA$5.7 million deposit from electricity utility Hydro Quebec will be returned.
As recently as last summer, The Green Organic Dutchman had said the structure was “expected to be the largest organic cannabis cultivation and processing facility in the world … if and when fully constructed.”
Matt Lamers is MJBizDaily’s international editor, based near Toronto. He can be reached at [email protected].